Chilean Central Bank Rate Left at 5%

August 14, 2013

The central bank board left the monetary policy interest rate at 5.0%, its level since a sole 25-basis point cut in January 2012.  Previously, the rate was raised 475 basis points in a dozen moves between June 2010 and June 2011 after having been cut by 775 bps to 0.5% during the first seven months of 2009.

A statement released after yesterday’s latest policy meeting, however, indicated risks to demand and output and noted low inflation.  To wit,

Domestically, incoming information shows a sharper slowdown for output than for demand. Consumption remains dynamic, although confidence surveys foresee a reduced impulse from this variable going forward, while investment moderates.  Headline inflation fell within the tolerance range, as forecast, while core inflation measures are still hovering around 1% annually. Inflation expectations remain near the target in the policy horizon.

The central bank’s medium-term inflation target is 3%.  Some analysts had thought the 5% interest rate might be cut this month.  The implication left by today’s statement is that this could yet occur within the next couple of months.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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